>> live from pier three in san francisco, welcome to "bloomberg west," we recover the future of technology and business. i'm emily chang. ahead this hour, maybe sitting on the largest cash of internet data in the u.s. industry. the russian group sold -- stole 1.2 billion e-mail and passwords . we look into whether you should be worried about your data. and apple iphones are less than five weeks away from the grand unveiling. a media event on

september 9. it has been widely reported that the new iphones will have bigger screens, but what other features might they have? and will apple release that record? -- really set record? and foursquare is looking to make a comeback. they have just redone their flagship, making sharing the primary focus, and moving the check into a separate app. will it make the difference echoed dennis crowley will join us live -- will it make a difference? dennis crowley will join us live. how safe is your information? that question is front and center after a group of russian hackers stole 1.2 billion unique usernames and password combinations, and more than 500 million e-mail addresses. the stolen information was collected from more than 420 web -- 420,000 websites. they did not name the affected websites, but they are said to include household names.

our guest is the vice president of strategy at shape security. schuman, it sounds very bad. how worried should our users be echo >> it is difficult -- how worried should our viewers be? >> is the goal to say. we will probably learn more in the next few days -- it is difficult to say. we will probably learn more in the next two days. it is definitely on a larger scale than we have previously seen. >> how do i know if i need to be worried? >> that is one of the interesting questions, because you look at the previous breaches and they typically affect a small number of websites, or a single website. in the case of an ebay breach, were you have 145 credentials breached, what does it look like in this case echo is it one company that accounts for the vast majority of credentials echo is a large number of companies? we don't know. there were enormous extent as

in the last quarter because of this reach -- breach. will the specific companies that know what is happening have to face a similar cost in the current quarter, where they will suddenly have to spend a lot more to fix the problem? certainly, if they have discover they are affected by this breach, then they will have significant costs to figure out what went wrong and what they can do. one of the really scary things about it is that there may not be anything they can do about it, depending on the method of attack to create the breach. methods released so far indicate that the hacking groups started off by purchasing credentials online through other hacking groups in the black market. but then they used.net-based attacks. when you use a bot net-based attack, you use the previous credential stolen to go through the front door of other websites to be able to test those credentials and discover which

ones are valid on other websites. >> in other words, they learn individuals usernames and passwords, and then blast them across the internet to find other places where the user has used the same thing and the company never knows they gotten the exposure. >> exactly. and that is not something that constitutes a typical security breach on the company's part. because they do not have the vulnerability on the infrastructure that the hackers are exploiting. companies know? >> they can find evidence of the users names and passwords being used. in this particular case, the initial use cases have been used to expand malicious e-mail links. the companies that have users that are breach, they may discover these spam mail or malicious links going out. >> the report says it is a russian gang, essentially. who are these people? are they selling the information? is that the endgame? different system

on it comes to credentials. there are many things they can do. it looks like so far, they are providing it by services like sending out these malicious links. in some cases, they can use the bot nets that they have built in order to create even more sophisticated attacks, attacks like the name of the browser, which can be used to take those credentials and steal money from people's bank accounts. the level of monetization that they can actually accomplish is based on the specific type of attacks that they are selling in the rest of the black market. >> i imagine so many different businesses -- 10 years ago, the companies that would have face , in terms ofhing being online and being mobile even come i wonder what the companies risks are and how you can remediate that with insurance or whatever else. >> it certainly requires a great deal of specification and

vigilant in order to being tame a complicated online presence. and companies are trying to reach their users as broadly as possible, so having an online presence is pretty essential to every business this days. -- these days. million, though they have $38 million of insurance, -- you know, we keep asking if these attacks can really be stopped. can security get so good that these things will not happen, or will the hackers catch up every time? >> i don't think you can make a system that is absolutely not hackable from a theoretical standpoint. defensesake practical that make certain types of attacks so extensive that the hackers decide to do something else. >> what are those practical types of defenses? >> this is what security company's are fake -- are focused on.

--se barriers to per event prevent some type of automation. this game is estimated to be about 20 people, but they have stolen over one billion credentials. the only way to do that is through automation. the vulnerabilities that they discovered, as well as all the tools that they used to monetize and, if you can discover prevent those, then it is much more costly to run this type of business. >> a quick example. >> our product is called the botwall and it prevents any type of attack from being able to go on to your website. in this case, when they are trying to use the credentials and log into other websites to discover whether they were, they are unable to use the script to automatically login. if you have millions of credentials, you cannot manually test those and try to login manually. you have to use some kind of script through bot net at that scale. if the automation of the work,

the attack goes away and the business fails. >> thank you so much for that update. we will be watching to see if more information comes out in coming days. september 9 is the day apple is expected to unveil two new iphones. but besides the larger screen, what else can we expect? we will have a preview, next. ♪

>> i'm emily chang and this is "bloomberg west." mark your calendars, apple will unveil its newest iphones on september 9. we know about the larger screen, but here to tell us what else might be coming at this event, our editor at large cory johnson and senior rocketing director, marsh -- brian marshall. phones, -- do people

want the larger screen? opinion, this will be enough to drive a massive upgrade cycle of the existing base of iphone users. we have been joking for the past year that this will be the mother load of all upgrade cycles. >> it is big. it competes with the ipad. >> the ipad mini, 7.9 inches, no question. the largest we have seen out there the -- that we thought was ergonomically sensible was the lge flex. it is six inches. but it curves, so it kind of curves across the mandible. it fits nicely. we did not think that was too big. i think the 5.5 inch iphone will be fine. the question will be to see which the apple community likes better, the 4.7 inch or the 5.5 inch.

my best guess is a 50-50 split. >> apple didn't seem to get it right last time. their low-end phones underperformed for them. talk about how apple manages its supply chain. what does this mean when they do not know how this will take off and they are trying to launch this? they are taking a greater risk than ever. >> you bring up a good, huge point. of their base, about 100 million are not eligible to upgrade. that means there are 200 million within the existing phone base that is ready to migrate to the larger canvas. what we have seen is that it peaks and then comes down. now, we think that this is going 60 million units, 70 million units, 80 million units for quite some time. it will be quite a refresh cycle. >> what about the other new

features? what else can apple do besides the screen size? there has been a lot of talk about extending battery life. not much battery innovation in the past several decades. i was reading in the "new york times" about wi-fi charging, wirelessly essentially. what about this may come out? a dayone 5 last less than sometimes. >> me, too. >> number one, i think that will be the larger screen. number two, improved battery performance. >> it will need to be a better battery. a lot more power. >> dinner, and you can fit more in there -- it will be thinner, and you can fit more in there. >> when you break these phones open, the impact is almost all inside the battery. >> it will have an expanded surface area, so the battery life will increase your medically in our view. and then the eye -- the

operating system, ios eight. franco, we don't see a tremendous amount of innovation on the actual device. sellingss, it will be like hot cakes. >> it's going to sell anyway. but you wonder what is going to take to get more. , thatthings like that move the needle. >> samsung is throwing all kinds of junk at the phone. they have a barometer, the waterproof stuff. do you expect apple to respond with some of that and throw in some new possibilities? >> the cellphone market globally is a 2 billion unit market. now, smartphones for the first time ever over 50%. a billion units. this is largely immature market -- a mature market. think about pcs. have things really changed? not really. the fundamental format of the pc is not believe all thing. we feel smartphones have reached

a similar place of maturation. exciting product line that he has seen in 25 years, one analyst says. tim cook agrees with him. what else could there be? will the iwatch come out this fall? is it just the new phone? >> the commentary from the senior management team is, obviously, is trying to rally the troops internally, but also the public as well. >> yeah. >> how could the new iphone be more exciting than the original? >> at the end of the day, nothing will move the needle from an apple perspective with the exception of new, updated iphones. if you think about it, the apple ecosystem, they will join over $200 billion of revenue next year and ship over 200 million phones. even if the iwatch is a grand success, it will not move the needle from a financial perspective.

>> sales of the ipad had a -- an incredible success. if they were to launch the ipad with the same success that they had in the first year, this year , it would be less than 5% revenues. >> that is an interesting way to look at it. >> they could not do anything to match the success that they had with number one. >> when you have sweetheart carrier deals coupled with in sometal resale and cases up to 85% gross margins, it's still hard to compete with anything else. and considering the global cell phone market is a 2 billion unit market opportunity for my you cannot see anything else moving the needle. out there with the strategy of untying the user to the contract. fullser is actually paying cost for the phone. you have smartphones with fewer

features than the samsung galaxy or the iphone, but at a much lower cost. does that start to eat away at the business for apple and samsung? it will be a thing of the future, no question. but at the end of the day, the smartphone costs $600 or $700 without a contract. if you sign a two-year contract, that will be $2500. there is a little chunk of the price that is actually the phone. the real cost to the end customer is the subscription service. i don't expect much change overall in the high-end market of the phone where apple compete. the general smartphone industries about a $335 asp over one billion units. apple place at a category of twice that. >> brian marshall, isi senior managing director. you.ways, great to have we will be there on september 9

and bring you the full story when iphones, we hope, our release. sprint has dropped its bid for t-mobile, but is it really over? that is next. ♪

>> welcome back to "bloomberg west," and i'm emily chang. sprint has dropped its bid to buy t-mobile, citing revelatory concerns. and they also named a new seo in a state -- new ceo in a statement today. sprint now has an opportunity to focus their efforts on robust competition. but how do the nations's third and fourth largest carriers

compete with at&t and verizon going forward? t-mobile entertain offers from others, including dish? there are headlines crossing right now that are saying it may make sense to buy t-mobile. >> you are so lucky we live in the land of charlie ergen. i think those statements from tom wheeler are amazing. it is incredible to have an sec chairman come out so strongly -- now, mind you, it's just a day after sprint has left this deal, but to come out so strongly saying it is good to have separate carriers. i think it shows just how strong new regulatory ire might have been, had sprint pursue this. legerest spoke with john earlier this week, the colorful ceo of t-mobile. i asked him if the sprint deal did not happen, what are other

options, what about dish? this is what he had to say. >> i've been very consistent. i will not comment on any specific transactions of the company, never have. i've always been consistent that in the long term, if i really want to bring in long-term competition and lead this entire industry in the u.s., sales are important, capital is important. and one of those things could be a transaction in organically of some type. i've always said we have multiple options. in the short-term, what i have pointed out is that wanted to native lee and qualitatively, this company is hitting on all cylinders and we have a great runway. we have multiple options to accelerate being a carrier. we have been consistent in that all along. >> if it happens, you're the guy in charge. if it doesn't happen, you're the guy who has to figure out what to do. what else is in the spectrum, dish?

with aknow that transaction or without a transaction, i'm hugely in favor of john legere being in charge of anything. that is my position and always has been. >> what a knucklehead, that guy. >> i love it. what other options are there? didn't talk about selling the business. he didn't talk about walking away from the business. he is talking about ways to make t-mobile grow. >> and being in charge. >> and being in charge. look at. if someone wants to step into a situation, it could be a situation where they borrow so cannot do where they an acquisition without building out t-mobile's network. and sprint as a competitor will make it harder for t-mobile to grow and to get coverage where they want to get coverage. there are other ways to do this, but there are fewer ways for them to acquire spectrum and get

your. they will have to grow organically, and that will take boatloads of cash. >> and we do have a quotation from charlie, something he just said. the sprint announcement has just increased some of the option now the that we had. a lot happened in the last 24 hours. he added that t-mobile could be one of those they're looking at. we will continue to follow this story. foursquare is going back to basics as it tries to boost its users. dennis crowley tells us all about their new features right here on bloomberg west. >> it is 26 minutes past the hour and that means bloomberg tv is on the market. let's take a look at where stocks are trading right now. byatively small gains led energy stocks. in terms of individual stocks, walgreens is one of them. shares in the pharmacy store chain falling by the most in

seven years after the company cut its 2015 profit targets. it also said it's not going to pursue a tax in version, although it is going to buy all of europe's alliance foods. more "bloomberg west" after the break. ♪

>> i'm emily chang. this is "bloomberg west." time warner reported earnings just a day after rupert murdoch withdrew his $75 billion takeover bid of the company. .evenue down 9% from last year in the meantime, operating income jumped 17% to $1.6 billion. will the time warner ceo jeff bewkes revealed a growth plan that is more viable than murdoch could have? and will murdoch take another shot at this down the line? cory johnson is still with us in

the studio. jon erlichman also joined. did we hear anything that gives us any indication about how he is feeling, and how they are feeling about m&a? talked a lot about their business, but this is a story that will not be settled for a very long time, because this is jeff bewkes's bet on the and squeezingness more value out of them. m&aaguely talked about opportunities, but he is using this more than opportunities to say, we like the prospects of hbo as a global business, and the cable networks, and the turner operation as a global business. we don't have to be bigger. we are a leader in a bunch of categories, in movies like warner bros..

and this is my case to you, the analyst and the investors, that of a loan is a better proposition than us as part of fox. but obviously, we talk about the stock selloff that has happened since fox pulled the plug on its pursuit. this? is itu see not in play in the near future? >> yes, inasmuch as it is not still in play from fox. if we can believe murdoch at his word that he is not interested in the property at all, which i find hard to believe. i don't think any other players who would want to acquire the company are available to do so. rupert murdoch was bidding against himself. it's not a position you want to be in, but backing away from this bid for my he puts himself in a better position where it is not first offer or higher. haveould jeff bewkes

engaged a little bit more with rupert murdoch? has clearly been a position to get the benefit of the doubt from shareholders, because as we have been highlighting, he took a strategy to get out of businesses that he did not believe he should be in. that resulted in some pretty good performance for time warner stock. but it also left him in some ways exposed to a company like fox, to sort of say, where is the game plan from here? will be pressure on a company like this. a lot of these media companies do you like there is a way to squeeze some juice from some of the new ways of consuming content. talked aeteran, and he lot about the delay structured with amazon earlier this year, which brings older hbo shows, shows at least three years old, to amazon prime service. amazon is hungry for content. hbo is happy to sell them

content if it doesn't bother the pay-tv operators. and that resulted in something like 56% growth on the content revenue side for hbo year-over-year. if he can strike more deals like that, there is potentially the ability to unlock some quick value. but as i set the offset, i think this is a longer-term story that the shareholders will have to believe in from jeff bewkes. but i want to bring in the to bring-- >> i want in the banking managing director . .e did not talk about m&a what do you make of time warner's future and whether he made the right call? >> i think he made the right call, given the big come a absolutely. the initial offer was $85 a share. they did not make a second offer. every analyst on the entire street would argue, you know, if

you look at the break up values of time warner, they certainly supported values higher of -- higher than 89 -- $85. is, generating 15% annual growth in earnings if you hold multiple, time warner stock would have been there not long from now. at the end of the day, everyone is saying, is this some sort of ploy by rupert, is he going to come back echo at the end of the day, i think this is circular logic. -- is he going to come back? at the end of the day, i think it is circular logic. the price was going to be high enough such that fox would have to issue more stock. that pounded fox stock. and as a result, fox was less prepared to pay the higher number. at the end of the day, the circular logic did not work. and if somehow he could convince everybody that at a higher price it makes industrial sense, maybe fox stock would not get hit as

hard. adon't think this is negotiating ploy. it just didn't work as structured. >> strategically, though, i look at this from what rupert malik -- rupert murdoch was thinking about the way his business works. he liked the way this worked strategically. i cannot see him completely walking away from that. >> you know, welcome to the new rupert murdoch. i think this was a clear industrial logic. the industrial logic was a scale, and the volume of this year content used and controlled globally had to do with the way it was distributed. this is not about comcast or dealing with directv. this is like dealing with apple, ornetflix internationally, amazon, or whoever the next distributor is. there was an industrial logic, but the new rupert says, hey, i am more aligned with my public

shareholders and i do exercise a discipline in pricing. if he can get the deal done at an attractive level where he is aligned with shareholders, i think he would do it in a heartbeat. there is an industrial logic. but it is not like it is and all costs proposition. but what happens to time warner now? -- >> whatn play happens to time warner now? it is not in play right now. does it remain an independent company? >> i look at it this way. part of time warner's rationale -- and we have talked about it before, i think. there is really only one bidder. rupert doesn't want to be in a position where it bidding against himself, but that is about as good as it gets. imagine if there was a full bidding process. what time warner might ultimately want to do if they can revisit this topic in 12 to 24 months when comcast isn't

busy, when at&t isn't busy, when verizon isn't busy, when the ambitions of other new media companies broaden maybe more into entertainment, that would be a great time to auction the company. but right now is not a good time to auction the company. in the near term, the company has some pretty decent visibility in the trajectory of its growth. --was not necessarily necessary to sell the company, not for $85. >> all right, 12 to 24 months from now we will be watching. thank you so much. ahead, we take a look at the growing empire of hip-hop's royal couple, beyoncé and jay-z, who are ending their north american concert tour in san francisco tonight. ♪

>> welcome back. i'm emily chang. jay-z and beyoncé's "on the run"

wraps up in san francisco tonight. the power couples 18 north american shows are excited to bring in over $100 million in ticket sales with attendance topping out at over 850,000. i looked at the business of bmj and how they became the king and queen of hip-hop. >> they may be the most powerful -- popular couple in hip-hop music. from when they started dating to their secret wedding and their self-titled release, they kept everyone guessing on the next move him including marriage. 117 billboard top 100 songs and sold out shows, it's no wonder

they have become the king and queen of hip-hop. had deals with pepsi, l'oreal, and american express. jay-z has filed in millions from samsung, and struck deals with the brooklyn nets and barclays center. not to mention starting his own sports agency. they also rule social media, having a combined of 84 might -- a combined 84 million facebook fans and almost 15 million following on instagram. not -- may have 99 problems, but selling tickets isn't one. the couples 19 show north american tour has made $100 million the summer, averaging $5.3 million a night. i some estimates, it's the second most successful tour of all time after you to --u2's 360.

>> the reviews are in, the numbers are out. just how well did beyoncé and jay-z's on the run to her do? run "tour do? i was at the concert last night and i see reviews -- some horrible, some amazing. i'm not a music critic, but i loved it. i cannot comment on the state of their marriage. still a lot of debate about that. but jesse, just how well have they done on this tour? financially, in terms of ticket toes, and did it live up expectation? >> i think it exceeded expectations. it will end that being the second most successful tour based on gross revenue per show. that is really rare. they only did 20 shows. there were not as many dates,

but in terms of that key measure, it will be the second most successful tour ever. >> what is the first? u2 360, which was back in the late 1990's. >> what are the metrics in looking at the success of a tour like this yet are these what you look at? >> i think it is. obviously, the more shows, the better. when you look at the fixed costs and producing the show, the more you can get out of that show, the more profitable it will be. obviously, live nation would have liked for them to do more shows. 20 of them made a lot of money. >> who is the bigger draw, b or j? >> i think it is the two of them. they are inextricable at this point. the controversy that surrounded the beginning of the to work probably only -- of the tour

probably only magnified the interest. also, take out that controversy, they are also two of the most talented performers on the planet, and getting them both in the same to her -- tour is a once-in-a-lifetime opportunity. >> i feel like everyday there is a new story on page six of tmz. artist pairing up -- of course, beyoncé and jay-z are married. will this be more of a trend? said -- i saw said that they've seemed like two solo artist on stage and that they did not have much chemistry. but that is interesting. touring.d rihanna are they are obviously not married. the combination headline is a trend you see more of these days. the fact that they are married is may be secondary. eminem and rihanna is also one

of the few tours this summer to be playing at stadiums, which is where "on the run" was, along with one direction, the "where we are" tour. when we look at the state of the music industry today, the way digital music has changed that, we talk a bit about the way the tours are so important because that is where they make all of the money. is this the case where the record of selling and the two were is selling. >>the tour is selling echo i'm not on the record business, for i cannot speak to it precisely, but i think tours are clearly the big moneymaker for artists at the scale of jay-z and beyoncé. records will sell, and in some ways, records are promoting tours as opposed to tours

promoting records, which is how it had always been. have a deal for an hbo special, which will be coming up. they also have their own festival. a are certainly looking at other revenue streams. i wish i could go to the concert all over again. it was so good for the >> you still can. there is tonight. >> i'm so jealous. thank you, jesse lawrence. we will be back with a dennis crowley on foursquare's makeover. ♪

>> welcome back. i'm emily chang. foursquare is trying to get back into the forefront of users appds, hoping a revamp will draw more to the service. findingfocused search restaurants and businesses nearby. the check-in was moved to another app.

is the cofounder and ceo, dennis crowley. local search, that is what you are focused on now. what is foursquare today, and why do you think this is a way forward? >> foursquare has always had a huge focus on local search. it has been part of the core story since 2009, 2010. over the last five years, we have had some and -- so much data on the type of places people go to and what they do when they check in. what we are trying to do is make this a personalized version of local search. if you go to yelp or google, everyone gets the same search results, no matter what you are searching for. we want to change the results depending on what they love, what their case are and where they have been. >> i agree that. -- with that. i certainly could have used this when i was walking around looking for a restaurant to heat

at before the beyoncé and jay-z concert last night. but foursquare has these gay medication features of mayors -if vacation game features of mayors and badges. are you sacrificing these or seeing more? we looked at the app that we created and the ecosystem that we created. people want to use the search, but not check-in. some people did not even know we had a search feature. have seen about 90% of the people checking in on the old foursquare app two months or so ago checking in on swarm. we have lost a couple of users, but we are excited about the way the company is set up to dominate the search with the foursquare app.

-- you know, helping you meet me up and keep up with friends. >> what makes you think that users will offer up this information willingly, when at the same time you have able flocking to secret apps and so much concern about privacy? >> one of the great things about the new foursquare app is we are not sharing your location with friends anymore. we heard that all the time, i love using foursquare, but i don't want people to know where i am all the time. that is fine. the place you go to, we do not share that with anyone. instead, it goes to making our recommendations smarter and stronger and more personalized. >> you and i have talked so many times over the years postop the product has evolved. you've always been super confident and positive about the future. what do you think this next phase is? is this a make or break phase four foursquare? is make orthink it

break. we have had a strong roadmap since we started the company. it is about how we collect data about the interesting things that happen in the world, recycle that data, and give it back to people in the form of personalized searches. we have been doing that up until now and i think we have a considerable lead over everyone else. no one has built this type of location awareness type of technology the way we have. we have so much data. we have learned so much about the world. and this is one of the first chances we really have to show everyone what we can do with the data that we have collected. we are super excited. >> you want to remain independent for now. how long will you keep at its? to long will you keep trying break through? >> we will keep doing this until it works. we feel strong about the position of the company. the company has been generating a significant amount of revenue, more already in 2014 that we generated all of last year.

we will continue to execute well. >> dennis crowley, ceo of foursquare. as always, thanks for joining us. time now for the bwest byte, one number that tells a whole lot. tell me it is about beyoncé. >> it is not at all. i know you want to talk about it, obviously. you work it into every single interview. >> [laughter] >> 67%, that is dish network debt to asset ratio. this is a highly leveraged company. limitless number. they can only borrow so much money. they have already barred 60 7% of assets for sub you could look at that and say it is hard for them to barro more money. more money. >> it will continue to follow the story. >> tell me about the concert.

but how much time do you have? >> lots of time. >> thanks for watching. we will see you later. ♪

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>> from bloomberg world headquarters in new york, i am mark crumpton. the is "bottom line," intersection of business and economics with a mainstream perspective. primary elections could shape the battle lines in november and beyond. and the palestinian ambassador to the united nations. white house night's dinner for african leaders had special significance. viewers here in the united states and those of you joining us from around the world, welcome. we have